Bank of America: US stock market rally to be limited until US employment situation shows clear direction
Strategist Michael Hartnett of Bank of America stated that the US stock market may trade sideways before significant changes in US employment data. Despite the rebound of tech stocks like NVIDIA, concerns arise from the decline in bond yields and bank stocks. Hartnett believes that a clear employment situation will eliminate the uncertainty in the fall, and the current market risk lies in rotation. It is expected that the Federal Reserve may cut interest rates in the coming months, and investors should focus on bond-sensitive industries such as resource stocks and real estate investment trusts
According to the latest information from Zhitong Finance APP, a strategist from Bank of America stated that the stock market may trade sideways and fluctuate until there are clear signs of weakness or strength in US employment data.
Led by Michael Hartnett, the team mentioned that several market factors support both bullish and bearish arguments. While optimists believe that technology and semiconductor stocks, including this year's leader NVIDIA (NVDA.US), have rebounded from key technical levels, pessimists warn that "nothing good happens" when bond yields and bank stocks decline simultaneously.
In a report, Hartnett wrote that a clear direction in employment will "remove the uncertainty of autumn", as non-farm payrolls increased by 142,000 in August, below analysts' expectations. "Before that, risks will rotate rather than tear or retreat."
Since mid-July, the US stock market has been fluctuating due to concerns about an economic recession triggered by weak employment data. This has also led investors to speculate on the extent of potential rate cuts by the Federal Reserve in the coming months.
Derivatives data shows that traders currently expect more than 100 basis points of rate cuts by the end of 2024, with a 25 basis point cut expected next week.
Despite the rise in the S&P 500 index last year, Hartnett remained bearish on the stock market, stating that he prefers bonds in 2024.
The next employment report from the US Department of Labor will be released on October 4th. Hartnett mentioned that he still favors bonds and gold. For stock investors, he recommends investing in resource stocks and real estate investment trusts, among other bond-sensitive industries